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These Directions are adopted pursuant to Article 23, paragraph 2 of the TPEx Rules Governing the Trading of Exchange-Traded Notes.
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Definition of Terms
- Issuer: means a securities firm that issues Exchange-Traded Notes (hereinafter “ETNs”).
- Applicant: means a principal who authorizes a securities broker to apply for subscription or redemption of ETNs through a securities trading account opened with a securities firm, or a securities firm that applies for subscription or redemption of ETNs for its own account.
- Indicative Value: means a value for an ETN, calculated based on movements in the underlying index, accrued dividends, investor fees, and other relevant data.
- Subscription: means a securities firm, for its own account or on behalf of its customer, delivering cash consideration to an issuer to subscribe to ETNs. The subscription price shall be calculated based on the number of units prescribed in the ETN issuance plan and the indicative value announced after market close on the application date.
- Redemption: means a securities firm, for its own account or on behalf of its customer, delivering ETNs to an issuer in exchange for cash consideration prior to maturity of the ETNs. The redemption price shall be calculated based on the number of units prescribed in the ETN issuance plan and the indicative value announced after market close on the application date.
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Operating principles for a securities firm that carries out the subscription or redemption of ETNs for its own account or on behalf of its customer:
- The securities firm shall submit applications for subscription and redemption of ETNs through computer linkup on TPEx trading market trading days during the period from the time of TPEx listing of the ETNs to the last trading day.
- A securities firm carrying out the subscription or redemption of ETNs for its own account or on behalf of its customer shall comply with the following:
- Applicants must use the available balance from the same book-entry depository account on the same business date for all ETNs required for an ETN redemption operation.
- When the securities firm carries out a subscription order on behalf of its customer, it may collect the subscription price in advance, and shall submit the application within the time period specified by the TPEx. After ascertaining the actual amount payable, the securities firm shall notify the customer to make additional payment if the payment collected in advance is insufficient or to receive a refund if it is excessive.
- A securities firm handling subscriptions and redemptions on behalf of its customer shall open a separate segregated deposit account with its settlement bank specifically for the collection and disbursement of the price and other relevant fees.
- The collection and transfer of relevant securities referred to in the preceding subparagraph shall be handled via book-entry transfer; payment collection from and disbursement to the customer shall be handled through the settlement account.
- A securities firms carrying out redemption operations for its own account or on behalf of its customer shall, in accordance with the ETN Issuance Plan, calculate the quantity of the ETNs it holds. If the total quantity reaches the quantity required to apply for redemption, it shall apply for redemption within the time limit set by the TPEx. The TPEx will promptly forward the application to the central securities depository for earmarking of the ETNs.
- If the central securities depository fails to complete the earmarking for the redemption referred to in the preceding subparagraph, the application for redemption will also be unsuccessful.
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Operating procedures for relevant entities carrying out the subscription or redemption of ETNs:
- After referring to the number of units under the applications for subscriptions and redemptions of ETNs reported by the issuer, and accepting qualified applications for subscription or redemption, the TPEx will compile and forward the applications to the issuer for review, and will make the review results available on the TPEx computer system for inquiry by securities firms. The securities firm will then notify the applicants of the results accordingly for confirmation. It shall retain a record of the applications and review results for future reference. Regardless of whether the issuer approves a subscription or redemption application forwarded by the TPEx, it shall in each case notify the TPEx of its decision before the end of the prescribed time period on the application date so that the TPEx can make the information available for inquiry by the securities firms.
- For redemption applications accepted by the TPEx, the TPEx will forward the applications to the central securities depository for earmarking. Upon receiving notice from the central securities depository of the results of earmarking, the TPEx will compile and forward the results to the issuer and make the same information available on the TPEx computer system for inquiry by securities firms.
- If an application for subscription of ETNs is found after review by the relevant entities to comply with requirements, the securities firm shall confirm the subscription details before 12 noon on the first business day following the application date, and in accordance with the statement of funds payable provided by the TPEx at 12:30 p.m., shall transfer the funds to the TPEx before 2:30 p.m. On the second business day following the application date, the central securities depository will complete the ETN account transfer operation, and the TPEx will aggregate such funds and transfer them to the issuer.
- If an application for redemption of ETNs is found after review by the relevant entities to comply with requirements, the securities firm shall confirm the redemption details before 12 noon on the first business day following the application date, and in accordance with the statement of funds payable provided by the TPEx at 12:30 p.m., shall transfer the funds to the TPEx before 2:30 p.m. On the second business day following the application date, the central securities depository will complete the ETN cancellation operation, and the TPEX will aggregate such funds and transfer them to the securities firm. The securities firm will then deliver the funds to the applicant.
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These Directions, and any amendments hereto, shall be publicly announced and implemented after recordation by the competent authority.
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